Mrs. Black (for
herself, Mr. Roskam,
Mrs. Blackburn,
Mrs. Ellmers,
Mr. Kelly,
Mr. Scott of South Carolina,
Mr. Schock, and
Mr. Terry) introduced the following
bill; which was referred to the Committee
on Energy and Commerce, and in addition to the Committees on
Ways and Means and
Education and the
Workforce, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within the
jurisdiction of the committee concerned

A BILL

To repeal the Federally subsidized loan program for
non-profit health insurance, to provide for association health plans, and for
other purposes.

1.

Short title

This Act may be cited as the
___ Act of 2012.

I

Repeal of
Federally Subsidized Loan Program for Non-Profit Health Insurance

101.

Repeal of
Federally subsidized loan program for non-profit health insurance

(a)

In
general

Section 1322 of the
Patient Protection and Affordable Care Act (42 U.S.C. 18042) is repealed, and
the Internal Revenue Code of 1986 shall be applied as if such provisions, and
the amendments made thereby, had never been enacted.

(b)

IRC conforming
amendments

(1)

Section 501(c) of the Internal Revenue Code
of 1986 is amended by striking paragraph (29).

(2)

Section 6033 of such Code is amended by
striking subsection (m) and redesignating subsection (n) as subsection
(m).

(3)

Section 4958(e)(1)
of such Code is amended by striking paragraph (3), (4), or (29)
and inserting paragraph (3) or (4).

(c)

Rescission of
funds; repayment of defaulted loans

(1)

Rescission of
funds

Of the funds made
available under section 1322 of the Patient Protection and Affordable Care Act
(42 U.S.C. 18042), the unobligated balance is rescinded.

(2)

Repayment of
defaulted loans

In the case of a loan provided under such section
before the date of the enactment of this Act, the terms of the agreement
entered into under subsection (b)(2)(C) of such section, with respect to such
loan, and the regulations promulgated under subsection (b)(3) of such section
as in existence on the day before the date of enactment of this Act shall
continue to apply, except that—

(A)

such loan shall be
repaid within 2 years of the provision of such loan; and

(B)

the interest described in subsection
(b)(2)(C)(iii)(II) of such section to be applied to the aggregate amount of
such loan, shall be the bank prime rate published in the Federal Reserve
Statistical Release on selected interest rates (daily or weekly), and commonly
referred to as the H.15 release (or any successor publication).

II

Association
Health Plans

201.

Rules governing
association health plans

(a)

In
General

Subtitle B of title I
of the Employee Retirement Income Security Act
of 1974 is amended by adding after part 7 the following new
part:

8

RULES GOVERNING
ASSOCIATION HEALTH PLANS

801.

Association
health plans

(a)

In
General

For purposes of this part, the term association
health plan means a group health plan whose sponsor is (or is deemed
under this part to be) described in subsection (b).

(b)

Sponsorship

The
sponsor of a group health plan is described in this subsection if such
sponsor—

(1)

is organized and
maintained in good faith, with a constitution and bylaws specifically stating
its purpose and providing for periodic meetings on at least an annual basis, as
a bona fide trade association, a bona fide industry association (including a
rural electric cooperative association or a rural telephone cooperative
association), a bona fide professional association, or a bona fide chamber of
commerce (or similar bona fide business association, including a corporation or
similar organization that operates on a cooperative basis (within the meaning
of section
1381 of the Internal Revenue Code of 1986)), for substantial
purposes other than that of obtaining or providing medical care;

(2)

is established as
a permanent entity which receives the active support of its members and
requires for membership payment on a periodic basis of dues or payments
necessary to maintain eligibility for membership in the sponsor; and

(3)

does not condition
membership, such dues or payments, or coverage under the plan on the basis of
health status-related factors with respect to the employees of its members (or
affiliated members), or the dependents of such employees, and does not
condition such dues or payments on the basis of group health plan
participation.

(c)

Treatment of
certain sponsors and issuers

(1)

In
general

Any sponsor consisting of an association of entities
which meet the requirements of paragraphs (1), (2), and (3) of subsection (b)
shall be deemed to be a sponsor described in such subsection. A qualified
nonprofit health insurance issuer participating in the CO–OP program under
section 1322 of the Patient Protection and Affordable Care Act as of the day
before the date of the enactment of this part may be eligible to act as a
sponsor described in such subsection if such issuer satisfies the requirements
of section 806.

(2)

Qualified
nonprofit health insurance issuer

For purposes of paragraph (1):

(A)

In
general

The term qualified nonprofit health insurance
issuer means a health insurance issuer that is an organization—

(i)

that is organized
under State law as a nonprofit, member corporation;

(ii)

substantially all
of the activities of which consist of the issuance of qualified health plans in
the individual and small group markets in each State in which it is licensed to
issue such plans; and

(iii)

that meets the
other requirements of this paragraph.

(B)

Certain
organizations prohibited

An organization shall not be treated as
a qualified nonprofit health insurance issuer if—

(i)

the organization
or a related entity (or any predecessor of either) was a health insurance
issuer on July 16, 2009; or

(ii)

the organization
is sponsored by a State or local government, any political subdivision thereof,
or any instrumentality of such government or political subdivision.

(C)

Governance
requirements

An organization shall not be treated as a qualified
nonprofit health insurance issuer unless—

(i)

the governance of
the organization is subject to a majority vote of its members;

(ii)

its governing
documents incorporate ethics and conflict of interest standards protecting
against insurance industry involvement and interference; and

(iii)

as provided in
regulations promulgated by the Secretary, the organization is required to
operate with a strong consumer focus, including timeliness, responsiveness, and
accountability to members.

(D)

Profits inure to
benefit of members

An organization shall not be treated as a
qualified nonprofit health insurance issuer unless any profits made by the
organization are required to be used to lower premiums, to improve benefits, or
for other programs intended to improve the quality of health care delivered to
its members.

(E)

Compliance with
state insurance laws

An organization shall not be treated as a
qualified nonprofit health insurance issuer unless the organization meets all
the requirements that other issuers of qualified health plans are required to
meet in any State where the issuer offers a qualified health plan, including
solvency and licensure requirements, rules on payments to providers, and
compliance with network adequacy rules, rate and form filing rules, any
applicable State premium assessments and any other State law described in
section 1324(b) of the Patient Protection and Affordable Care Act.

(F)

Coordination
with state insurance reforms

An organization shall not be treated
as a qualified nonprofit health insurance issuer unless the organization does
not offer a health plan in a State until that State has in effect (or the
Secretary has implemented for the State) the market reforms required by part A
of title XXVII of the Public Health Service Act (as amended by subtitles A and
C of the Patient Protection and Affordable Care Act).

802.

Certification
of association health plans

(a)

In
General

The applicable authority shall prescribe by regulation a
procedure under which, subject to subsection (b), the applicable authority
shall certify association health plans which apply for certification as meeting
the requirements of this part.

(b)

Standards

Under
the procedure prescribed pursuant to subsection (a), in the case of an
association health plan that provides at least one benefit option which does
not consist of health insurance coverage, the applicable authority shall
certify such plan as meeting the requirements of this part only if the
applicable authority is satisfied that the applicable requirements of this part
are met (or, upon the date on which the plan is to commence operations, will be
met) with respect to the plan.

(c)

Requirements
Applicable to Certified Plans

An association health plan with
respect to which certification under this part is in effect shall meet the
applicable requirements of this part, effective on the date of certification
(or, if later, on the date on which the plan is to commence operations).

(d)

Requirements for
Continued Certification

The applicable authority may provide by
regulation for continued certification of association health plans under this
part.

(e)

Class
Certification for Fully Insured Plans

The applicable authority
shall establish a class certification procedure for association health plans
under which all benefits consist of health insurance coverage. Under such
procedure, the applicable authority shall provide for the granting of
certification under this part to the plans in each class of such association
health plans upon appropriate filing under such procedure in connection with
plans in such class and payment of the prescribed fee under section
807(a).

(f)

Certification of
Self-Insured Association Health Plans

An association health plan
which offers one or more benefit options which do not consist of health
insurance coverage may be certified under this part only if such plan consists
of any of the following:

(1)

a plan which
offered such coverage on the date of the enactment of this part,

(2)

a plan under which
the sponsor does not restrict membership to one or more trades and businesses
or industries and whose eligible participating employers represent a broad
cross-section of trades and businesses or industries, or

(3)

a plan whose
eligible participating employers represent one or more trades or businesses, or
one or more industries, consisting of any of the following: agriculture;
equipment and automobile dealerships; barbering and cosmetology; certified
public accounting practices; child care; construction; dance, theatrical and
orchestra productions; disinfecting and pest control; financial services;
fishing; food service establishments; hospitals; labor organizations; logging;
manufacturing (metals); mining; medical and dental practices; medical
laboratories; professional consulting services; sanitary services;
transportation (local and freight); warehousing; wholesaling/distributing; or
any other trade or business or industry which has been indicated as having
average or above-average risk or health claims experience by reason of State
rate filings, denials of coverage, proposed premium rate levels, or other means
demonstrated by such plan in accordance with regulations.

803.

Requirements
relating to sponsors and boards of trustees

(a)

Sponsor

The
requirements of this subsection are met with respect to an association health
plan if the sponsor has met (or is deemed under this part to have met) the
requirements of section 801(b) for a continuous period of not less than 3 years
ending with the date of the application for certification under this
part.

(b)

Board of
Trustees

The requirements of this subsection are met with respect
to an association health plan if the following requirements are met:

(1)

Fiscal
control

The plan is operated, pursuant to a trust agreement, by a
board of trustees which has complete fiscal control over the plan and which is
responsible for all operations of the plan.

(2)

Rules of
operation and financial controls

The board of trustees has in
effect rules of operation and financial controls, based on a 3-year plan of
operation, adequate to carry out the terms of the plan and to meet all
requirements of this title applicable to the plan.

(3)

Rules governing
relationship to participating employers and to contractors

(A)

Board
membership

(i)

In
general

Except as provided in clauses (ii) and (iii), the members
of the board of trustees are individuals selected from individuals who are the
owners, officers, directors, or employees of the participating employers or who
are partners in the participating employers and actively participate in the
business.

(ii)

Limitation

(I)

General
rule

Except as provided in subclauses (II) and (III), no such
member is an owner, officer, director, or employee of, or partner in, a
contract administrator or other service provider to the plan.

(II)

Limited
exception for providers of services solely on behalf of the
sponsor

Officers or employees of a sponsor which is a service
provider (other than a contract administrator) to the plan may be members of
the board if they constitute not more than 25 percent of the membership of the
board and they do not provide services to the plan other than on behalf of the
sponsor.

(III)

Treatment of
providers of medical care

In the case of a sponsor which is an
association whose membership consists primarily of providers of medical care,
subclause (I) shall not apply in the case of any service provider described in
subclause (I) who is a provider of medical care under the plan.

(iii)

Certain plans
excluded

Clause (i) shall not apply to an association health plan
which is in existence on the date of the enactment of this part.

(B)

Sole
authority

The board has sole authority under the plan to approve
applications for participation in the plan and to contract with a service
provider to administer the day-to-day affairs of the plan.

(c)

Treatment of
Franchise Networks

In the case of a group health plan which is
established and maintained by a franchiser for a franchise network consisting
of its franchisees—

(1)

the requirements
of subsection (a) and section 801(a) shall be deemed met if such requirements
would otherwise be met if the franchiser were deemed to be the sponsor referred
to in section 801(b), such network were deemed to be an association described
in section 801(b), and each franchisee were deemed to be a member (of the
association and the sponsor) referred to in section 801(b); and

(2)

the requirements
of section 804(a)(1) shall be deemed met.

The Secretary may by regulation
define for purposes of this subsection the terms franchiser,
franchise network, and franchisee.804.

Participation
and coverage requirements

(a)

Covered
Employers and Individuals

The requirements of this subsection are
met with respect to an association health plan if, under the terms of the
plan—

(1)

each participating
employer must be—

(A)

a member of the
sponsor,

(B)

the sponsor,
or

(C)

an affiliated
member of the sponsor with respect to which the requirements of subsection (b)
are met,

except that, in the case of a sponsor
which is a professional association or other individual-based association, if
at least one of the officers, directors, or employees of an employer, or at
least one of the individuals who are partners in an employer and who actively
participates in the business, is a member or such an affiliated member of the
sponsor, participating employers may also include such employer; and(2)

all individuals
commencing coverage under the plan after certification under this part must be
active or retired owners (including self-employed individuals), officers,
directors, or employees of, or partners in, participating employers.

(b)

Coverage of
Previously Uninsured Employees

In the case of an association
health plan in existence on the date of the enactment of the part, an
affiliated member of the sponsor of the plan may be offered coverage under the
plan as a participating employer only if—

(1)

the affiliated
member was an affiliated member on the date of certification under this part;
or

(2)

during the
12-month period preceding the date of the offering of such coverage, the
affiliated member has not maintained or contributed to a group health plan with
respect to any of its employees who would otherwise be eligible to participate
in such association health plan.

(c)

Individual
Market Unaffected

The requirements of this subsection are met
with respect to an association health plan if, under the terms of the plan, no
participating employer may provide health insurance coverage in the individual
market for any employee not covered under the plan which is similar to the
coverage contemporaneously provided to employees of the employer under the
plan, if such exclusion of the employee from coverage under the plan is based
on a health status-related factor with respect to the employee and such
employee would, but for such exclusion on such basis, be eligible for coverage
under the plan.

(d)

Prohibition of
Discrimination Against Employers and Employees Eligible To
Participate

The requirements of this subsection are met with
respect to an association health plan if—

(1)

under the terms of
the plan, all employers meeting the preceding requirements of this section are
eligible to qualify as participating employers for all geographically available
coverage options, unless, in the case of any such employer, participation or
contribution requirements of the type referred to in section 2711 of the
Public Health Service Act are not
met;

(2)

upon request, any
employer eligible to participate is furnished information regarding all
coverage options available under the plan; and

(3)

the applicable
requirements of sections 701, 702, and 703 are met with respect to the
plan.

The requirements of this section are met with respect to
an association health plan if the following requirements are met:

(1)

Contents of
governing instruments

The instruments governing the plan include
a written instrument, meeting the requirements of an instrument required under
section 402(a)(1), which—

(A)

provides that the
board of trustees serves as the named fiduciary required for plans under
section 402(a)(1) and serves in the capacity of a plan administrator (referred
to in section 3(16)(A));

(B)

provides that the
sponsor of the plan is to serve as plan sponsor (referred to in section
3(16)(B)); and

(C)

incorporates the
requirements of section 806.

(2)

Contribution
rates must be nondiscriminatory

(A)

The contribution
rates for any participating small employer do not vary on the basis of any
health status-related factor in relation to employees of such employer or their
beneficiaries and do not vary on the basis of the type of business or industry
in which such employer is engaged.

(B)

Nothing in this
title or any other provision of law shall be construed to preclude an
association health plan, or a health insurance issuer offering health insurance
coverage in connection with an association health plan, from—

(i)

setting
contribution rates based on the claims experience of the plan; or

(ii)

varying
contribution rates for small employers in a State to the extent that such rates
could vary using the same methodology employed in such State for regulating
premium rates in the small group market with respect to health insurance
coverage offered in connection with bona fide associations (within the meaning
of section 2791(d)(3) of the Public Health
Service Act),

subject to the requirements of
section 702(b) relating to contribution rates.(3)

Floor for number
of covered individuals with respect to certain plans

If any
benefit option under the plan does not consist of health insurance coverage,
the plan has as of the beginning of the plan year not fewer than 1,000
participants and beneficiaries.

(4)

Marketing
requirements

(A)

In
general

If a benefit option which consists of health insurance
coverage is offered under the plan, State-licensed insurance agents shall be
used to distribute to small employers coverage which does not consist of health
insurance coverage in a manner comparable to the manner in which such agents
are used to distribute health insurance coverage.

(B)

State-licensed
insurance agents

For purposes of subparagraph (A), the term
State-licensed insurance agents means one or more agents who are
licensed in a State and are subject to the laws of such State relating to
licensure, qualification, testing, examination, and continuing education of
persons authorized to offer, sell, or solicit health insurance coverage in such
State.

(5)

Regulatory
requirements

Such other requirements as the applicable authority
determines are necessary to carry out the purposes of this part, which shall be
prescribed by the applicable authority by regulation.

(b)

Ability of
Association Health Plans To Design Benefit Options

Subject to
section 514(f), nothing in this part or any provision of State law (as defined
in section 514(c)(1)) shall be construed to preclude an association health
plan, or a health insurance issuer offering health insurance coverage in
connection with an association health plan, from exercising its sole discretion
in selecting the specific items and services consisting of medical care to be
included as benefits under such plan or coverage, except (subject to section
514) in the case of (1) any law to the extent that it is not preempted under
section 731(a)(1) with respect to matters governed by section 711, 712, or 713,
or (2) any law of the State with which filing and approval of a policy type
offered by the plan was initially obtained to the extent that such law
prohibits an exclusion of a specific disease from such coverage.

806.

Maintenance of
reserves and provisions for solvency for plans providing health benefits in
addition to health insurance coverage

(a)

In
General

The requirements of this section are met with respect to
an association health plan if—

(1)

the benefits under
the plan consist solely of health insurance coverage; or

(2)

if the plan
provides any additional benefit options which do not consist of health
insurance coverage, the plan—

(A)

establishes and
maintains reserves with respect to such additional benefit options, in amounts
recommended by the qualified actuary, consisting of—

(i)

a reserve
sufficient for unearned contributions;

(ii)

a reserve
sufficient for benefit liabilities which have been incurred, which have not
been satisfied, and for which risk of loss has not yet been transferred, and
for expected administrative costs with respect to such benefit
liabilities;

(iii)

a reserve
sufficient for any other obligations of the plan; and

(iv)

a reserve
sufficient for a margin of error and other fluctuations, taking into account
the specific circumstances of the plan; and

(B)

establishes and
maintains aggregate and specific excess/stop loss insurance and solvency
indemnification, with respect to such additional benefit options for which risk
of loss has not yet been transferred, as follows:

(i)

The plan shall
secure aggregate excess/stop loss insurance for the plan with an attachment
point which is not greater than 125 percent of expected gross annual claims.
The applicable authority may by regulation provide for upward adjustments in
the amount of such percentage in specified circumstances in which the plan
specifically provides for and maintains reserves in excess of the amounts
required under subparagraph (A).

(ii)

The plan shall
secure specific excess/stop loss insurance for the plan with an attachment
point which is at least equal to an amount recommended by the plan’s qualified
actuary. The applicable authority may by regulation provide for adjustments in
the amount of such insurance in specified circumstances in which the plan
specifically provides for and maintains reserves in excess of the amounts
required under subparagraph (A).

(iii)

The plan shall
secure indemnification insurance for any claims which the plan is unable to
satisfy by reason of a plan termination.

Any person issuing to a plan
insurance described in clause (i), (ii), or (iii) of subparagraph (B) shall
notify the Secretary of any failure of premium payment meriting cancellation of
the policy prior to undertaking such a cancellation. Any regulations prescribed
by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B)
may allow for such adjustments in the required levels of excess/stop loss
insurance as the qualified actuary may recommend, taking into account the
specific circumstances of the plan.(b)

Minimum Surplus
in Addition to Claims Reserves

In the case of any association
health plan described in subsection (a)(2), the requirements of this subsection
are met if—

(1)

the plan
establishes and maintains surplus in an amount at least equal to—

(A)

$500,000,
or

(B)

subject to
paragraph (2), such greater amount (but not greater than $2,000,000) as may be
set forth in regulations prescribed by the applicable authority, considering
the level of aggregate and specific excess/stop loss insurance provided with
respect to such plan and other factors related to solvency risk, such as the
plan’s projected levels of participation or claims, the nature of the plan’s
liabilities, and the types of assets available to assure that such liabilities
are met; and

(2)

in the case the plan establishes and
maintains surplus in an amount greater than $2,000,000, in addition to claims
reserves such funds are used only to expand or improve health benefits offered
under such plan or the provider network under such plan or to include more
health or non-health insurance options under such plan.

(c)

Additional
Requirements

In the case of any association health plan described
in subsection (a)(2), the applicable authority may provide such additional
requirements relating to reserves, excess/stop loss insurance, and
indemnification insurance as the applicable authority considers appropriate.
Such requirements may be provided by regulation with respect to any such plan
or any class of such plans.

(d)

Adjustments for
Excess/Stop Loss Insurance

The applicable authority may provide
for adjustments to the levels of reserves otherwise required under subsections
(a) and (b) with respect to any plan or class of plans to take into account
excess/stop loss insurance provided with respect to such plan or plans.

(e)

Alternative
Means of Compliance

The applicable authority may permit an
association health plan described in subsection (a)(2) to substitute, for all
or part of the requirements of this section (except subsection (a)(2)(B)(iii)),
such security, guarantee, hold-harmless arrangement, or other financial
arrangement as the applicable authority determines to be adequate to enable the
plan to fully meet all its financial obligations on a timely basis and is
otherwise no less protective of the interests of participants and beneficiaries
than the requirements for which it is substituted. The applicable authority may
take into account, for purposes of this subsection, evidence provided by the
plan or sponsor which demonstrates an assumption of liability with respect to
the plan. Such evidence may be in the form of a contract of indemnification,
lien, bonding, insurance, letter of credit, recourse under applicable terms of
the plan in the form of assessments of participating employers, security, or
other financial arrangement.

(f)

Measures To
Ensure Continued Payment of Benefits by Certain Plans in Distress

(1)

Payments by
certain plans to association health plan fund

(A)

In
general

In the case of an association health plan described in
subsection (a)(2), the requirements of this subsection are met if the plan
makes payments into the Association Health Plan Fund under this subparagraph
when they are due. Such payments shall consist of annual payments in the amount
of $5,000, and, in addition to such annual payments, such supplemental payments
as the Secretary may determine to be necessary under paragraph (2). Payments
under this paragraph are payable to the Fund at the time determined by the
Secretary. Initial payments are due in advance of certification under this
part. Payments shall continue to accrue until a plan’s assets are distributed
pursuant to a termination procedure.

(B)

Penalties for
failure to make payments

If any payment is not made by a plan
when it is due, a late payment charge of not more than 100 percent of the
payment which was not timely paid shall be payable by the plan to the
Fund.

(C)

Continued duty
of the secretary

The Secretary shall not cease to carry out the
provisions of paragraph (2) on account of the failure of a plan to pay any
payment when due.

In any case in which the
applicable authority determines that there is, or that there is reason to
believe that there will be: (A) a failure to take necessary corrective actions
under section 809(a) with respect to an association health plan described in
subsection (a)(2); or (B) a termination of such a plan under section 809(b) or
810(b)(8) (and, if the applicable authority is not the Secretary, certifies
such determination to the Secretary), the Secretary shall determine the amounts
necessary to make payments to an insurer (designated by the Secretary) to
maintain in force excess/stop loss insurance coverage or indemnification
insurance coverage for such plan, if the Secretary determines that there is a
reasonable expectation that, without such payments, claims would not be
satisfied by reason of termination of such coverage. The Secretary shall, to
the extent provided in advance in appropriation Acts, pay such amounts so
determined to the insurer designated by the Secretary.

(3)

Association
health plan fund

(A)

In
general

There is established on the books of the Treasury a fund
to be known as the Association Health Plan Fund. The Fund shall
be available for making payments pursuant to paragraph (2). The Fund shall be
credited with payments received pursuant to paragraph (1)(A), penalties
received pursuant to paragraph (1)(B); and earnings on investments of amounts
of the Fund under subparagraph (B).

(B)

Investment

Whenever
the Secretary determines that the moneys of the fund are in excess of current
needs, the Secretary may request the investment of such amounts as the
Secretary determines advisable by the Secretary of the Treasury in obligations
issued or guaranteed by the United States.

(g)

Excess/Stop Loss
Insurance

For purposes of this section—

(1)

Aggregate
excess/stop loss insurance

The term aggregate excess/stop
loss insurance means, in connection with an association health plan, a
contract—

(A)

under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
aggregate claims under the plan in excess of an amount or amounts specified in
such contract;

(B)

which is
guaranteed renewable; and

(C)

which allows for
payment of premiums by any third party on behalf of the insured plan.

(2)

Specific
excess/stop loss insurance

The term specific excess/stop
loss insurance means, in connection with an association health plan, a
contract—

(A)

under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
claims under the plan in connection with a covered individual in excess of an
amount or amounts specified in such contract in connection with such covered
individual;

(B)

which is
guaranteed renewable; and

(C)

which allows for
payment of premiums by any third party on behalf of the insured plan.

(h)

Indemnification
Insurance

For purposes of this section, the term
indemnification insurance means, in connection with an association
health plan, a contract—

(1)

under which an
insurer (meeting such minimum standards as the applicable authority may
prescribe by regulation) provides for payment to the plan with respect to
claims under the plan which the plan is unable to satisfy by reason of a
termination pursuant to section 809(b) (relating to mandatory
termination);

(2)

which is
guaranteed renewable and noncancellable for any reason (except as the
applicable authority may prescribe by regulation); and

(3)

which allows for
payment of premiums by any third party on behalf of the insured plan.

(i)

Reserves

For
purposes of this section, the term reserves means, in connection
with an association health plan, plan assets which meet the fiduciary standards
under part 4 and such additional requirements regarding liquidity as the
applicable authority may prescribe by regulation.

(j)

Solvency
Standards Working Group

(1)

In
general

Within 90 days after the date of the enactment of this
part, the applicable authority shall establish a Solvency Standards Working
Group. In prescribing the initial regulations under this section, the
applicable authority shall take into account the recommendations of such
Working Group.

(2)

Membership

The
Working Group shall consist of not more than 15 members appointed by the
applicable authority. The applicable authority shall include among persons
invited to membership on the Working Group at least one of each of the
following:

(A)

a representative
of the National Association of Insurance Commissioners;

(B)

a representative
of the American Academy of Actuaries;

(C)

a representative
of the State governments, or their interests;

(D)

a representative
of existing self-insured arrangements, or their interests;

(E)

a representative
of associations of the type referred to in section 801(b)(1), or their
interests; and

(F)

a representative
of multiemployer plans that are group health plans, or their interests.

807.

Requirements
for application and related requirements

(a)

Filing
Fee

Under the procedure prescribed pursuant to section 802(a), an
association health plan shall pay to the applicable authority at the time of
filing an application for certification under this part a filing fee in the
amount of $5,000, which shall be available in the case of the Secretary, to the
extent provided in appropriation Acts, for the sole purpose of administering
the certification procedures applicable with respect to association health
plans.

(b)

Information To
Be Included in Application for Certification

An application for
certification under this part meets the requirements of this section only if it
includes, in a manner and form which shall be prescribed by the applicable
authority by regulation, at least the following information:

(1)

Identifying
information

The names and addresses of—

(A)

the sponsor;
and

(B)

the members of the
board of trustees of the plan.

(2)

States in which
plan intends to do business

The States in which participants and
beneficiaries under the plan are to be located and the number of them expected
to be located in each such State.

(3)

Bonding
requirements

Evidence provided by the board of trustees that the
bonding requirements of section 412 will be met as of the date of the
application or (if later) commencement of operations.

(4)

Plan
documents

A copy of the documents governing the plan (including
any bylaws and trust agreements), the summary plan description, and other
material describing the benefits that will be provided to participants and
beneficiaries under the plan.

(5)

Agreements with
service providers

A copy of any agreements between the plan and
contract administrators and other service providers.

(6)

Funding
report

In the case of association health plans providing benefits
options in addition to health insurance coverage, a report setting forth
information with respect to such additional benefit options determined as of a
date within the 120-day period ending with the date of the application,
including the following:

(A)

Reserves

A
statement, certified by the board of trustees of the plan, and a statement of
actuarial opinion, signed by a qualified actuary, that all applicable
requirements of section 806 are or will be met in accordance with regulations
which the applicable authority shall prescribe.

(B)

Adequacy of
contribution rates

A statement of actuarial opinion, signed by a
qualified actuary, which sets forth a description of the extent to which
contribution rates are adequate to provide for the payment of all obligations
and the maintenance of required reserves under the plan for the 12-month period
beginning with such date within such 120-day period, taking into account the
expected coverage and experience of the plan. If the contribution rates are not
fully adequate, the statement of actuarial opinion shall indicate the extent to
which the rates are inadequate and the changes needed to ensure
adequacy.

(C)

Current and
projected value of assets and liabilities

A statement of
actuarial opinion signed by a qualified actuary, which sets forth the current
value of the assets and liabilities accumulated under the plan and a projection
of the assets, liabilities, income, and expenses of the plan for the 12-month
period referred to in subparagraph (B). The income statement shall identify
separately the plan’s administrative expenses and claims.

(D)

Costs of
coverage to be charged and other expenses

A statement of the
costs of coverage to be charged, including an itemization of amounts for
administration, reserves, and other expenses associated with the operation of
the plan.

(E)

Other
information

Any other information as may be determined by the
applicable authority, by regulation, as necessary to carry out the purposes of
this part.

(c)

Filing Notice of
Certification With States

A certification granted under this part
to an association health plan shall not be effective unless written notice of
such certification is filed with the applicable State authority of each State
in which at least 25 percent of the participants and beneficiaries under the
plan are located. For purposes of this subsection, an individual shall be
considered to be located in the State in which a known address of such
individual is located or in which such individual is employed.

(d)

Notice of
Material Changes

In the case of any association health plan
certified under this part, descriptions of material changes in any information
which was required to be submitted with the application for the certification
under this part shall be filed in such form and manner as shall be prescribed
by the applicable authority by regulation. The applicable authority may require
by regulation prior notice of material changes with respect to specified
matters which might serve as the basis for suspension or revocation of the
certification.

(e)

Reporting
Requirements for Certain Association Health Plans

An association
health plan certified under this part which provides benefit options in
addition to health insurance coverage for such plan year shall meet the
requirements of section 103 by filing an annual report under such section which
shall include information described in subsection (b)(6) with respect to the
plan year and, notwithstanding section 104(a)(1)(A), shall be filed with the
applicable authority not later than 90 days after the close of the plan year
(or on such later date as may be prescribed by the applicable authority). The
applicable authority may require by regulation such interim reports as it
considers appropriate.

(f)

Engagement of
Qualified Actuary

The board of trustees of each association
health plan which provides benefits options in addition to health insurance
coverage and which is applying for certification under this part or is
certified under this part shall engage, on behalf of all participants and
beneficiaries, a qualified actuary who shall be responsible for the preparation
of the materials comprising information necessary to be submitted by a
qualified actuary under this part. The qualified actuary shall utilize such
assumptions and techniques as are necessary to enable such actuary to form an
opinion as to whether the contents of the matters reported under this
part—

(1)

are in the
aggregate reasonably related to the experience of the plan and to reasonable
expectations; and

(2)

represent such
actuary’s best estimate of anticipated experience under the plan.

The opinion by the qualified actuary
shall be made with respect to, and shall be made a part of, the annual
report.808.

Notice
requirements for voluntary termination

Except as provided in section 809(b), an
association health plan which is or has been certified under this part may
terminate (upon or at any time after cessation of accruals in benefit
liabilities) only if the board of trustees, not less than 60 days before the
proposed termination date—

(1)

provides to the
participants and beneficiaries a written notice of intent to terminate stating
that such termination is intended and the proposed termination date;

(2)

develops a plan
for winding up the affairs of the plan in connection with such termination in a
manner which will result in timely payment of all benefits for which the plan
is obligated; and

(3)

submits such plan
in writing to the applicable authority.

Actions required under this section
shall be taken in such form and manner as may be prescribed by the applicable
authority by regulation.809.

Corrective
actions and mandatory termination

(a)

Actions To Avoid
Depletion of Reserves

An association health plan which is
certified under this part and which provides benefits other than health
insurance coverage shall continue to meet the requirements of section 806,
irrespective of whether such certification continues in effect. The board of
trustees of such plan shall determine quarterly whether the requirements of
section 806 are met. In any case in which the board determines that there is
reason to believe that there is or will be a failure to meet such requirements,
or the applicable authority makes such a determination and so notifies the
board, the board shall immediately notify the qualified actuary engaged by the
plan, and such actuary shall, not later than the end of the next following
month, make such recommendations to the board for corrective action as the
actuary determines necessary to ensure compliance with section 806. Not later
than 30 days after receiving from the actuary recommendations for corrective
actions, the board shall notify the applicable authority (in such form and
manner as the applicable authority may prescribe by regulation) of such
recommendations of the actuary for corrective action, together with a
description of the actions (if any) that the board has taken or plans to take
in response to such recommendations. The board shall thereafter report to the
applicable authority, in such form and frequency as the applicable authority
may specify to the board, regarding corrective action taken by the board until
the requirements of section 806 are met.

(b)

Mandatory
Termination

In any case in which—

(1)

the applicable
authority has been notified under subsection (a) (or by an issuer of
excess/stop loss insurance or indemnity insurance pursuant to section 806(a))
of a failure of an association health plan which is or has been certified under
this part and is described in section 806(a)(2) to meet the requirements of
section 806 and has not been notified by the board of trustees of the plan that
corrective action has restored compliance with such requirements; and

(2)

the applicable
authority determines that there is a reasonable expectation that the plan will
continue to fail to meet the requirements of section 806,

the board of trustees of the plan
shall, at the direction of the applicable authority, terminate the plan and, in
the course of the termination, take such actions as the applicable authority
may require, including satisfying any claims referred to in section
806(a)(2)(B)(iii) and recovering for the plan any liability under subsection
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that the affairs
of the plan will be, to the maximum extent possible, wound up in a manner which
will result in timely provision of all benefits for which the plan is
obligated.810.

Whenever the Secretary
determines that an association health plan which is or has been certified under
this part and which is described in section 806(a)(2) will be unable to provide
benefits when due or is otherwise in a financially hazardous condition, as
shall be defined by the Secretary by regulation, the Secretary shall, upon
notice to the plan, apply to the appropriate United States district court for
appointment of the Secretary as trustee to administer the plan for the duration
of the insolvency. The plan may appear as a party and other interested persons
may intervene in the proceedings at the discretion of the court. The court
shall appoint such Secretary trustee if the court determines that the
trusteeship is necessary to protect the interests of the participants and
beneficiaries or providers of medical care or to avoid any unreasonable
deterioration of the financial condition of the plan. The trusteeship of such
Secretary shall continue until the conditions described in the first sentence
of this subsection are remedied or the plan is terminated.

(b)

Powers as
Trustee

The Secretary, upon appointment as trustee under
subsection (a), shall have the power—

(1)

to do any act
authorized by the plan, this title, or other applicable provisions of law to be
done by the plan administrator or any trustee of the plan;

(2)

to require the
transfer of all (or any part) of the assets and records of the plan to the
Secretary as trustee;

(3)

to invest any
assets of the plan which the Secretary holds in accordance with the provisions
of the plan, regulations prescribed by the Secretary, and applicable provisions
of law;

(4)

to require the
sponsor, the plan administrator, any participating employer, and any employee
organization representing plan participants to furnish any information with
respect to the plan which the Secretary as trustee may reasonably need in order
to administer the plan;

(5)

to collect for the
plan any amounts due the plan and to recover reasonable expenses of the
trusteeship;

(6)

to commence,
prosecute, or defend on behalf of the plan any suit or proceeding involving the
plan;

(7)

to issue, publish,
or file such notices, statements, and reports as may be required by the
Secretary by regulation or required by any order of the court;

(8)

to terminate the
plan (or provide for its termination in accordance with section 809(b)) and
liquidate the plan assets, to restore the plan to the responsibility of the
sponsor, or to continue the trusteeship;

(9)

to provide for the
enrollment of plan participants and beneficiaries under appropriate coverage
options; and

(10)

to do such other
acts as may be necessary to comply with this title or any order of the court
and to protect the interests of plan participants and beneficiaries and
providers of medical care.

(c)

Notice of
Appointment

As soon as practicable after the Secretary’s
appointment as trustee, the Secretary shall give notice of such appointment
to—

Except to the extent inconsistent with the provisions of
this title, or as may be otherwise ordered by the court, the Secretary, upon
appointment as trustee under this section, shall be subject to the same duties
as those of a trustee under
section
704 of title 11, United States Code, and shall have the duties
of a fiduciary for purposes of this title.

(e)

Other
Proceedings

An application by the Secretary under this subsection
may be filed notwithstanding the pendency in the same or any other court of any
bankruptcy, mortgage foreclosure, or equity receivership proceeding, or any
proceeding to reorganize, conserve, or liquidate such plan or its property, or
any proceeding to enforce a lien against property of the plan.

(f)

Jurisdiction of
Court

(1)

In
general

Upon the filing of an application for the appointment as
trustee or the issuance of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction of the plan involved and
its property wherever located with the powers, to the extent consistent with
the purposes of this section, of a court of the United States having
jurisdiction over cases under
chapter 11 of title 11,
United States Code. Pending an adjudication under this section such court shall
stay, and upon appointment by it of the Secretary as trustee, such court shall
continue the stay of, any pending mortgage foreclosure, equity receivership, or
other proceeding to reorganize, conserve, or liquidate the plan, the sponsor,
or property of such plan or sponsor, and any other suit against any receiver,
conservator, or trustee of the plan, the sponsor, or property of the plan or
sponsor. Pending such adjudication and upon the appointment by it of the
Secretary as trustee, the court may stay any proceeding to enforce a lien
against property of the plan or the sponsor or any other suit against the plan
or the sponsor.

(2)

Venue

An
action under this section may be brought in the judicial district where the
sponsor or the plan administrator resides or does business or where any asset
of the plan is situated. A district court in which such action is brought may
issue process with respect to such action in any other judicial
district.

(g)

Personnel

In
accordance with regulations which shall be prescribed by the Secretary, the
Secretary shall appoint, retain, and compensate accountants, actuaries, and
other professional service personnel as may be necessary in connection with the
Secretary’s service as trustee under this section.

811.

State
assessment authority

(a)

In
General

Notwithstanding section 514, a State may impose by law a
contribution tax on an association health plan described in section 806(a)(2),
if the plan commenced operations in such State after the date of the enactment
of this part.

(b)

Contribution
Tax

For purposes of this section, the term contribution
tax imposed by a State on an association health plan means any tax
imposed by such State if—

(1)

such tax is
computed by applying a rate to the amount of premiums or contributions, with
respect to individuals covered under the plan who are residents of such State,
which are received by the plan from participating employers located in such
State or from such individuals;

(2)

the rate of such
tax does not exceed the rate of any tax imposed by such State on premiums or
contributions received by insurers or health maintenance organizations for
health insurance coverage offered in such State in connection with a group
health plan;

(3)

such tax is
otherwise nondiscriminatory; and

(4)

the amount of any
such tax assessed on the plan is reduced by the amount of any tax or assessment
otherwise imposed by the State on premiums, contributions, or both received by
insurers or health maintenance organizations for health insurance coverage,
aggregate excess/stop loss insurance (as defined in section 806(g)(1)),
specific excess/stop loss insurance (as defined in section 806(g)(2)), other
insurance related to the provision of medical care under the plan, or any
combination thereof provided by such insurers or health maintenance
organizations in such State in connection with such plan.

812.

Definitions and
rules of construction

(a)

Definitions

For
purposes of this part—

(1)

Group health
plan

The term group health plan has the meaning
provided in section 733(a)(1) (after applying subsection (b) of this
section).

(2)

Medical
care

The term medical care has the meaning provided
in section 733(a)(2).

(3)

Health insurance
coverage

The term health insurance coverage has the
meaning provided in section 733(b)(1).

(4)

Health insurance
issuer

The term health insurance issuer has the
meaning provided in section 733(b)(2).

(5)

Applicable
authority

The term applicable authority means the
Secretary, except that, in connection with any exercise of the Secretary’s
authority regarding which the Secretary is required under section 506(d) to
consult with a State, such term means the Secretary, in consultation with such
State.

(6)

Health
status-related factor

The term health status-related
factor has the meaning provided in section 733(d)(2).

(7)

Individual
market

(A)

In
general

The term individual market means the market
for health insurance coverage offered to individuals other than in connection
with a group health plan.

(B)

Treatment of
very small groups

(i)

In
general

Subject to clause (ii), such term includes coverage
offered in connection with a group health plan that has fewer than 2
participants as current employees or participants described in section
732(d)(3) on the first day of the plan year.

(ii)

State
exception

Clause (i) shall not apply in the case of health
insurance coverage offered in a State if such State regulates the coverage
described in such clause in the same manner and to the same extent as coverage
in the small group market (as defined in section 2791(e)(5) of the
Public Health Service Act) is
regulated by such State.

(8)

Participating
employer

The term participating employer means, in
connection with an association health plan, any employer, if any individual who
is an employee of such employer, a partner in such employer, or a self-employed
individual who is such employer (or any dependent, as defined under the terms
of the plan, of such individual) is or was covered under such plan in
connection with the status of such individual as such an employee, partner, or
self-employed individual in relation to the plan.

(9)

Applicable state
authority

The term applicable State authority means,
with respect to a health insurance issuer in a State, the State insurance
commissioner or official or officials designated by the State to enforce the
requirements of title XXVII of the Public Health
Service Act for the State involved with respect to such
issuer.

(10)

Qualified
actuary

The term qualified actuary means an
individual who is a member of the American Academy of Actuaries.

(11)

Affiliated
member

The term affiliated member means, in
connection with a sponsor—

(A)

a person who is
otherwise eligible to be a member of the sponsor but who elects an affiliated
status with the sponsor,

(B)

in the case of a
sponsor with members which consist of associations, a person who is a member of
any such association and elects an affiliated status with the sponsor,
or

(C)

in the case of an
association health plan in existence on the date of the enactment of this part,
a person eligible to be a member of the sponsor or one of its member
associations.

(12)

Large
employer

The term large employer means, in
connection with a group health plan with respect to a plan year, an employer
who employed an average of at least 51 employees on business days during the
preceding calendar year and who employs at least 2 employees on the first day
of the plan year.

(13)

Small
employer

The term small employer means, in
connection with a group health plan with respect to a plan year, an employer
who is not a large employer.

(b)

Rules of
Construction

(1)

Employers and
employees

For purposes of determining whether a plan, fund, or
program is an employee welfare benefit plan which is an association health
plan, and for purposes of applying this title in connection with such plan,
fund, or program so determined to be such an employee welfare benefit
plan—

(A)

in the case of a
partnership, the term employer (as defined in section 3(5))
includes the partnership in relation to the partners, and the term
employee (as defined in section 3(6)) includes any partner in
relation to the partnership; and

(B)

in the case of a
self-employed individual, the term employer (as defined in section
3(5)) and the term employee (as defined in section 3(6)) shall
include such individual.

(2)

Plans, funds,
and programs treated as employee welfare benefit plans

In the
case of any plan, fund, or program which was established or is maintained for
the purpose of providing medical care (through the purchase of insurance or
otherwise) for employees (or their dependents) covered thereunder and which
demonstrates to the Secretary that all requirements for certification under
this part would be met with respect to such plan, fund, or program if such
plan, fund, or program were a group health plan, such plan, fund, or program
shall be treated for purposes of this title as an employee welfare benefit plan
on and after the date of such
demonstration.

.

(b)

Conforming
Amendments to Preemption Rules

(1)

Section 514(b)(6)
of such Act (29
U.S.C. 1144(b)(6)) is amended by adding at the end the
following new subparagraph:

(E)

The preceding subparagraphs of this
paragraph do not apply with respect to any State law in the case of an
association health plan which is certified under part
8.

.

(2)

Section 514 of
such Act (29 U.S.C.
1144) is amended—

(A)

in subsection
(b)(4), by striking Subsection (a) and inserting
Subsections (a) and (d);

(B)

in subsection
(b)(5), by striking subsection (a) in subparagraph (A) and
inserting subsection (a) of this section and subsections (a)(2)(B) and
(b) of section 805, and by striking subsection (a) in
subparagraph (B) and inserting subsection (a) of this section or
subsection (a)(2)(B) or (b) of section 805; and

(C)

by inserting after
subsection (e) the following new subsection:

(f)(1)

Except as provided in
subsection (b)(4), the provisions of this title shall supersede any and all
State laws insofar as they may now or hereafter preclude, or have the effect of
precluding, a health insurance issuer from offering health insurance coverage
in connection with an association health plan which is certified under part
8.

(2)

Except as provided in paragraphs (4)
and (5) of subsection (b) of this section—

(A)

In any case in which health insurance
coverage of any policy type is offered under an association health plan
certified under part 8 to a participating employer operating in such State, the
provisions of this title shall supersede any and all laws of such State insofar
as they may preclude a health insurance issuer from offering health insurance
coverage of the same policy type to other employers operating in the State
which are eligible for coverage under such association health plan, whether or
not such other employers are participating employers in such plan.

(B)

In any case in which health insurance
coverage of any policy type is offered in a State under an association health
plan certified under part 8 and the filing, with the applicable State authority
(as defined in section 812(a)(9)), of the policy form in connection with such
policy type is approved by such State authority, the provisions of this title
shall supersede any and all laws of any other State in which health insurance
coverage of such type is offered, insofar as they may preclude, upon the filing
in the same form and manner of such policy form with the applicable State
authority in such other State, the approval of the filing in such other
State.

(3)

Nothing in subsection (b)(6)(E) or
the preceding provisions of this subsection shall be construed, with respect to
health insurance issuers or health insurance coverage, to supersede or impair
the law of any State—

(A)

providing solvency standards or
similar standards regarding the adequacy of insurer capital, surplus, reserves,
or contributions, or

(B)

relating to prompt payment of
claims.

(4)

For additional provisions relating to
association health plans, see subsections (a)(2)(B) and (b) of section
805.

(5)

For purposes of this subsection, the
term association health plan has the meaning provided in section
801(a), and the terms health insurance coverage,
participating employer, and health insurance issuer
have the meanings provided such terms in section 812,
respectively.

.

(3)

Section
514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) is
amended—

(A)

in clause (i)(II),
by striking and at the end;

(B)

in clause (ii), by
inserting and which does not provide medical care (within the meaning of
section 733(a)(2)), after arrangement,, and by striking
title. and inserting title, and; and

(C)

by adding at the
end the following new clause:

(iii)

subject to subparagraph (E), in the
case of any other employee welfare benefit plan which is a multiple employer
welfare arrangement and which provides medical care (within the meaning of
section 733(a)(2)), any law of any State which regulates insurance may
apply.

.

(4)

Section 514(d) of
such Act is amended—

(A)

by striking
Nothing and inserting (1) Except as provided in paragraph
(2), nothing; and

(B)

by adding at the
end the following new paragraph:

(2)

Nothing in any other provision of law
enacted on or after the date of the enactment of this paragraph shall be
construed to alter, amend, modify, invalidate, impair, or supersede any
provision of this title, except by specific cross-reference to the affected
section.

.

(c)

Plan
Sponsor

Section 3(16)(B) of such Act (29 U.S.C.
102(16)(B)) is amended by adding at the end the following new
sentence: Such term also includes a person serving as the sponsor of an
association health plan under part 8..

Section 102(b) of such Act (29 U.S.C.
102(b)) is amended by adding at the end the following: An association
health plan shall include in its summary plan description, in connection with
each benefit option, a description of the form of solvency or guarantee fund
protection secured pursuant to this Act or applicable State law, if
any..

(e)

Savings
Clause

Section 731(c) of such Act is amended by inserting
or part 8 after this part.

Not later than January 1, 2013, the Secretary of Labor
shall report to the Committee on Education and the Workforce of the House of
Representatives and the Committee on Health, Education, Labor, and Pensions of
the Senate the effect association health plans have had, if any, on reducing
the number of uninsured individuals.

(g)

Clerical
Amendment

The table of contents in section 1 of the
Employee Retirement Income Security Act of
1974 is amended by inserting after the item relating to section 734
the following new items:

Section 3(40)(B) of the
Employee Retirement Income Security Act of
1974 (29
U.S.C. 1002(40)(B)) is amended—

(1)

in clause (i), by
inserting after control group, the following: except
that, in any case in which the benefit referred to in subparagraph (A) consists
of medical care (as defined in section 812(a)(2)), two or more trades or
businesses, whether or not incorporated, shall be deemed a single employer for
any plan year of such plan, or any fiscal year of such other arrangement, if
such trades or businesses are within the same control group during such year or
at any time during the preceding 1-year period,;

(2)

in clause (iii),
by striking (iii) the determination and inserting the
following:

(iii)(I)

in any case in which the
benefit referred to in subparagraph (A) consists of medical care (as defined in
section 812(a)(2)), the determination of whether a trade or business is under
common control with another trade or business shall be
determined under regulations of the Secretary applying principles consistent
and coextensive with the principles applied in determining whether employees of
two or more trades or businesses are treated as employed by a single employer
under section 4001(b), except that, for purposes of this paragraph, an interest
of greater than 25 percent may not be required as the minimum interest
necessary for common control, or

(II)

in any other case, the
determination

;

(3)

by redesignating
clauses (iv) and (v) as clauses (v) and (vi), respectively; and

(4)

by inserting after
clause (iii) the following new clause:

(iv)

in any case in which the benefit
referred to in subparagraph (A) consists of medical care (as defined in section
812(a)(2)), in determining, after the application of clause (i), whether
benefits are provided to employees of two or more employers, the arrangement
shall be treated as having only one participating employer if, after the
application of clause (i), the number of individuals who are employees and
former employees of any one participating employer and who are covered under
the arrangement is greater than 75 percent of the aggregate number of all
individuals who are employees or former employees of participating employers
and who are covered under the
arrangement,

.

203.

Enforcement
provisions relating to association health plans

(a)

Criminal
Penalties for Certain Willful Misrepresentations

Section 501 of
the Employee Retirement Income Security Act of
1974 (29
U.S.C. 1131) is amended by adding at the end the following new
subsection:

(c)

Any person who
willfully falsely represents, to any employee, any employee’s beneficiary, any
employer, the Secretary, or any State, a plan or other arrangement established
or maintained for the purpose of offering or providing any benefit described in
section 3(1) to employees or their beneficiaries as—

(1)

being an
association health plan which has been certified under part 8;

(2)

having been
established or maintained under or pursuant to one or more collective
bargaining agreements which are reached pursuant to collective bargaining
described in section 8(d) of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the Railway Labor Act (45 U.S.C.
152, paragraph Fourth) or which are reached pursuant to labor-management
negotiations under similar provisions of State public employee relations laws;
or

(3)

being a plan or
arrangement described in section 3(40)(A)(i),

shall, upon conviction, be
imprisoned not more than 5 years, be fined under title 18, United States Code,
or
both.

.

(b)

Cease Activities
Orders

Section 502 of such Act (29 U.S.C. 1132) is amended by
adding at the end the following new subsection:

(n)

Association
Health Plan Cease-and-Desist Orders

(1)

In
general

Subject to paragraph (2), upon application by the
Secretary showing the operation, promotion, or marketing of an association
health plan (or similar arrangement providing benefits consisting of medical
care (as defined in section 733(a)(2))) that—

(A)

is not certified
under part 8, is subject under section 514(b)(6) to the insurance laws of any
State in which the plan or arrangement offers or provides benefits, and is not
licensed, registered, or otherwise approved under the insurance laws of such
State; or

(B)

is an association
health plan certified under part 8 and is not operating in accordance with the
requirements under part 8 for such certification,

a district court of the United States
shall enter an order requiring that the plan or arrangement cease
activities.(2)

Exception

Paragraph
(1) shall not apply in the case of an association health plan or other
arrangement if the plan or arrangement shows that—

(A)

all benefits under
it referred to in paragraph (1) consist of health insurance coverage;
and

(B)

with respect to
each State in which the plan or arrangement offers or provides benefits, the
plan or arrangement is operating in accordance with applicable State laws that
are not superseded under section 514.

(3)

Additional
equitable relief

The court may grant such additional equitable
relief, including any relief available under this title, as it deems necessary
to protect the interests of the public and of persons having claims for
benefits against the
plan.

.

(c)

Responsibility
for Claims Procedure

Section 503 of such Act (29 U.S.C. 1133) is
amended by inserting (a) In general.— before In
accordance, and by adding at the end the following new
subsection:

(b)

Association
Health Plans

The terms of each association health plan which is
or has been certified under part 8 shall require the board of trustees or the
named fiduciary (as applicable) to ensure that the requirements of this section
are met in connection with claims filed under the
plan.

.

204.

Cooperation
between Federal and State authorities

Section 506 of the
Employee Retirement Income Security Act of
1974 (29
U.S.C. 1136) is amended by adding at the end the following new
subsection:

(d)

Consultation
With States With Respect to Association Health Plans

(1)

Agreements with
states

The Secretary shall consult with the State recognized
under paragraph (2) with respect to an association health plan regarding the
exercise of—

(A)

the Secretary’s
authority under sections 502 and 504 to enforce the requirements for
certification under part 8; and

(B)

the Secretary’s
authority to certify association health plans under part 8 in accordance with
regulations of the Secretary applicable to certification under part 8.

(2)

Recognition of
primary domicile state

In carrying out paragraph (1), the
Secretary shall ensure that only one State will be recognized, with respect to
any particular association health plan, as the State with which consultation is
required. In carrying out this paragraph—

(A)

in the case of a
plan which provides health insurance coverage (as defined in section
812(a)(3)), such State shall be the State with which filing and approval of a
policy type offered by the plan was initially obtained, and

(B)

in any other case,
the Secretary shall take into account the places of residence of the
participants and beneficiaries under the plan and the State in which the trust
is
maintained.

.

205.

Effective date
and transitional and other rules

(a)

Effective
Date

The amendments made by this title shall take effect 1 year
after the date of the enactment of this Act. The Secretary of Labor shall first
issue all regulations necessary to carry out the amendments made by this title
within 1 year after the date of the enactment of this Act.

(b)

Treatment of
Certain Existing Health Benefits Programs

(1)

In
general

In any case in which, as of the date of the enactment of
this Act, an arrangement is maintained in a State for the purpose of providing
benefits consisting of medical care for the employees and beneficiaries of its
participating employers, at least 200 participating employers make
contributions to such arrangement, such arrangement has been in existence for
at least 10 years, and such arrangement is licensed under the laws of one or
more States to provide such benefits to its participating employers, upon the
filing with the applicable authority (as defined in section 812(a)(5) of the
Employee Retirement Income Security Act of
1974 (as amended by this title)) by the arrangement of an
application for certification of the arrangement under part 8 of subtitle B of
title I of such Act—

(A)

such arrangement
shall be deemed to be a group health plan for purposes of title I of such
Act;

(B)

the requirements
of sections 801(a) and 803(a) of the Employee
Retirement Income Security Act of 1974 shall be deemed met with
respect to such arrangement;

(C)

the requirements
of section 803(b) of such Act shall be deemed met, if the arrangement is
operated by a board of directors which—

(i)

is elected by the
participating employers, with each employer having one vote; and

(ii)

has complete
fiscal control over the arrangement and which is responsible for all operations
of the arrangement;

(D)

the requirements
of section 804(a) of such Act shall be deemed met with respect to such
arrangement; and

(E)

the arrangement
may be certified by any applicable authority with respect to its operations in
any State only if it operates in such State on the date of
certification.

The provisions of this subsection
shall cease to apply with respect to any such arrangement at such time after
the date of the enactment of this Act as the applicable requirements of this
subsection are not met with respect to such arrangement.(2)

Definitions

For
purposes of this subsection, the terms group health plan,
medical care, and participating employer shall have
the meanings provided in section 812 of the Employee Retirement Income Security Act of
1974, except that the reference in paragraph (7) of such section to
an association health plan shall be deemed a reference to an
arrangement referred to in this subsection.